Liam Croke: Putting theory into practice - walk the talk

I was talking to a friend of mine last week who also works in the financial services industry and we were talking about how business was etcetera. He asked me what was the one thing I found most difficult and frustrating over the past 12 months and I guess he was surprised by response.

I was talking to a friend of mine last week who also works in the financial services industry and we were talking about how business was etcetera. He asked me what was the one thing I found most difficult and frustrating over the past 12 months and I guess he was surprised by response.

You see I find one of the biggest challenges is not with banks or with life assurance companies; it is actually with people, and trying to get them interested in their own finances.

You see I put together a plan for them, and work out what needs to be done in order for them to achieve their goals and to be fair they initially feel good about themselves, motivated and excited about the future but I find it they don’t follow through on my advice soon after it is given, they get distracted and rather than saving for retirement for example, they spend their money on a holiday.

What happens is that people give up their long term goals for instant gratification.

I met with a client in early March and put together a great review for him, one of his main goals was to save for his young son’s future education – but yet I am still waiting for him to set up that account. I told another client exactly how she should get out of credit card debt and if she did what I suggested, that debt of €7,350 would be gone in September 2015 but again she has yet to implement her plan – she told me that after she comes back from Gran Canaria in August she is going to start.

And don’t get me started on current accounts. This is a topic that people are always telling me how fed up they are with having to pay high quarterly fees and how they are going to move providers. But research shows that very few of us are actually following through on our promise to move. The Central Bank released figures on the numbers of people switching current accounts from one provider to another.

Last year just 14,439 switched current accounts and the lion’s share of them were probably made up of Danske Bank customers who had no other choice but to move. Do you know how many current accounts are in operation in Ireland?

Five million, four hundred and twenty nine thousand, four hundred and ninety eight to be exact (5,429,498)

If the average cost of operating a current account in Ireland is supposedly €170 per year, then all those current account holders are paying just under €1 Billion annually in current account fees. If everyone switched or operated their account in a manner that reduced the fee’s applying to it, we would save collectively about €814 million in fee’s each year!

In the UK by the way, they have 80 million current accounts and about 1.2 million switch every year. So, the British obviously are more interested in paying less than we are because we switch at less than one fifth of the rate that they do.

I was reading a great book recently by a financial guru in the states called Todd Tresidder, and he said that the prerequisite to improving your financial situation has nothing to do with anything financial – it is, according to him, all about commitment. It is that organising force that makes things happen.

And the same thing applies to the legend of the Samurai who apparently lived by certain rules which were – no hesitation, no doubt, no surprise and no fear.

And this is great because once they decided on a particular course of action, they were committed to it, they knew everything they needed to know about it, they weren’t afraid of it and they got on with it as quickly as possible.

If only we applied the same methodology to our finances we would be much better off.

A client of mine I met last Thursday did just that. He had circa €25,000 sitting in a current account earning nothing. He also had a variable rate mortgage with BOI paying a rate of 4.5%. I showed him how he could earn four times more with his money by moving it to another account and how a simple overpayment each month would take 6 years 6 months off the term remaining on his mortgage.

Twenty five minutes after he left my office he called me to say that he had moved his money to a better account and had set up that standing order to overpay on his mortgage – The stuff of Samurai!

This isn’t complicated stuff, but why don’t we do the things we say we will?

According to Ralph Keeney of Dukes University in the US, he claims the biggest killer of people is not smoking, cancer or being overweight, Keeney put’s it down to our inability to make smart choices and overcome our self- destructive behaviours.

He suggests that 50% of us will make a lifestyle decision that will ultimately lead us to an early grave – and I can empathise with this because we encounter people all the time who delay making financial decisions that eventually leads to stress that ultimately leads to problems that physically manifest themselves.

For example did you know it has been proven that?

29% of people suffer severe anxiety compared with 4% who were financially less stressed

44% had migraines or other headaches compared with 15% who had less financial stress

6% reported heart attacks, double the rate for those with low debt levels

23% have severe depression compared with 4% who were less financially stressed

Now I know we can’t attribute some of these statistics down to our inability to make and follow through with financial decisions we promise to make but it does play a part.

It’s not the things we do that we regret the most, it’s the things we don’t do. It’s the regret of missed opportunities that keep us from our nights’ sleep five years later those are the moments that make us angry with ourselves where we regret not having done something about it.

What we need to do is take action – we need to set ourselves deadlines, and commit to doing whatever it is we need to do – we need to be like the Samurai.